Aurora Cannabis Stock Guide: How to Trade ACB Stock CFDs

Aurora Cannabis Inc. (ACB) is a leading producer, distributor, and retailer in the worldwide cannabis industry, making it a potentially notable stock for traders looking to gain exposure to new market opportunities.

This article will guide you through the essentials of how to trade Aurora, focusing on company insights and trading strategies. We'll explore the company's historical milestones and fundamentals, key drivers of the price of ACB stock, and the dynamics of ACB CFD trading.

You'll also find essential information on risk management to help you trade more confidently and mitigate potential losses. By the end of this guide, you'll have a better understanding of how to trade ACB CFDs more efficiently and effectively. Let’s get started.

What Is Aurora Cannabis, Inc.?

Aurora Cannabis Inc., established in 2006 by Terry Booth, Steve Dobler, Dale Lesack, and Chris Mayerson, is a Canadian cannabis producer headquartered in Edmonton. In 2014, the company acquired a 160+ acre parcel and received a federal licence to grow cannabis from Health Canada, making it the first in the province of Alberta to do so.

Aurora became a publicly traded entity on the Toronto Stock Exchange (TSX) on July 24, 2017, and later was listed on the New York Stock Exchange (NYSE) on October 23, 2018, under the ticker symbol ACB.

Aurora’s operations now extend across 25 countries on five continents, covering medical and recreational cannabis markets. Its recreational Greybeard brand was awarded "Best Diamonds of the Year" by KIND Magazine in December 2022. The company’s extensive product offerings include dried cannabis, oils, soft gels, oral dissolve strips, edibles, and vaporisers.

On February 8, 2024, Aurora acquired MedReleaf Australian, a distributor of medicinal cannabis products in Australia, further expanding its presence in the medical cannabis market. Aurora’s other international operations are significant, with activities in regions including the Eurozone and Latin America.

In the fourth quarter of the fiscal year ending March 31, 2024, Aurora Cannabis reported a total net revenue of CAD 67.4 million, a 5% increase from the same period in the previous year. This increase was mainly attributed to higher sales in Australia and Europe.

However, the company's consumer cannabis revenue decreased from $14.5 million to $10.2 million during that time frame as Aurora prioritised supplying its higher-margin international market over its lower-margin good manufacturing practice (GMP) consumer products.

Many traders may follow Aurora's activities in cannabis production and distribution because of its role as the largest global medical cannabis company operating in nationally legal markets as of February 2024 and its listings on major stock exchanges.

Aurora Cannabis Stock Trading

There are several ways to gain exposure to Aurora stock. Two popular options are traditional stock ownership and trading contracts for difference (CFDs).

By purchasing ACB shares on the TSX or NYSE, you would own a stake in the company and make gains if the stock price appreciates and incur a loss if it depreciates. This approach may be suited for traders who prefer holding their positions over an extended period, potentially benefiting from stock value increases. It’s important to note that the fees and costs associated with longer-term trading must be factored into risk management plans.

Alternatively, trading ACB through CFDs involves speculating on the stock's price movements without owning the actual shares. A CFD is a contract between a trader and a CFD provider in which the difference in a stock’s price from opening to closing the trade is settled in cash minus any fees.

This method allows traders to speculate on upward and downward price movements, adding flexibility but also increasing potential risk. With CFDs, traders can either go long, expecting the price to rise, or go short when expecting the price to fall.

Profits or losses in CFD trading are realised based on the difference between your position's opening and closing prices minus any applicable costs. If you predict the ACB stock price will increase, you can open a "Buy" position and potentially close it at a higher price. Conversely, if you expect the stock price to decrease, you can open a "Sell" position and close it at a lower price. Profits or losses are determined by how much the stock price moves in the chosen direction.

CFD trading is often conducted using leverage, which allows traders to control a larger position with a smaller initial capital outlay. For instance, with leverage of 1:10, a $100 margin deposit can control a $1,000 position, multiplying potential profits or losses.

This leverage and market volatility associated with CFDs require careful risk management.

Factors Influencing ACB CFD Price Movements

Understanding the dynamics that drive Aurora Cannabis (ACB) stock prices is essential for traders. Let’s explore a few key factors that may impact ACB’s valuation and how they might shape trading decisions.

Market Trends and Industry News

Market trends and cannabis industry news may impact trader sentiment and demand for ACB shares.

For example, if a major cannabis legalisation bill is proposed or passed in a market where ACB operates, it could boost trader confidence and potentially drive ACB’s stock price higher.

Conversely, negative news, such as regulatory crackdowns or supply chain disruptions, may lead to price declines.

Company-Specific Developments

ACB’s earnings reports, product launches, and other company-specific news can directly impact its stock price. Strong earnings or successful product launches can potentially lead to price increases.

If, for example, ACB reports better-than-expected quarterly earnings due to increased sales or cost-cutting measures, its stock price may rise. On the other hand, poor earnings results or product recalls could negatively impact the stock.

Regulatory Changes and Legalisation

Changes in cannabis regulations, whether tightening or relaxing, can significantly affect ACB’s business environment, costs, and compliance requirements.

If a country or state legalises recreational cannabis use, ACB’s market potential may expand, potentially leading to higher stock prices. However, any regulatory hurdles or delays in approvals may weigh down the stock.

It's important to remember that past performance is not indicative of future results, and market conditions can change unpredictably.

CFD Trading Strategies for Aurora Cannabis

To trade Aurora Cannabis CFDs, adopting effective strategies that align with your personal goals and risk tolerance is essential. Here are three widely used trading styles to help you trade ACB CFDs.

Trend Following

Trend following is a popular strategy among CFD traders. It focuses on identifying the market direction and holding a position until signs of a reversal are observed. The idea is to open a CFD position early in the trend and maintain it until the trend shows clear signs of ending.

Traders can utilise technical indicators, like moving averages and the Relative Strength Index (RSI), or fundamental analysis, such as a company's financial performance and economic indicators, to help inform their entry and exit points.

Range Trading

Range trading is often used in markets where prices fluctuate within a well-defined range between support and resistance levels. For ACB CFDs, traders can open positions near the support level for potential price increases and close them near the resistance level, or vice versa for price decreases.

Technical indicators like the RSI and stochastic oscillators (momentum indicators) can help identify overbought or oversold conditions, making this strategy suitable for capturing short-term price movements within the range.

News-Based Trading

News-based trading involves making decisions based on the latest market news and events, such as economic data releases or corporate earnings reports. Traders can speculate on how these announcements will impact the price of ACB, positioning themselves to potentially take advantage of the resulting volatility.

This trading strategy requires less reliance on technical analysis and more on staying informed and ready to react quickly to significant market news. However, it carries higher risks due to the unpredictable nature of market reactions.

Risk Management for Aurora Trading with CFDs

Effective risk management is crucial for traders to help protect their capital while trading ACB CFDs.

Understanding leverage is a fundamental aspect of CFD trading. Leverage allows you to control a larger position with a smaller amount of capital, potentially magnifying both gains and losses.

For instance, if you use leverage to trade ACB, even a small price movement can potentially lead to significant gains or losses, calculated based on the total value of the position, not just the initial margin. Notably, while leverage can enhance profits, it can also magnify losses, so it should be used cautiously.

Position sizing is another vital risk management strategy involving determining the appropriate trade size based on one's total capital and risk tolerance. For example, if you have $10,000 in trading capital, you may want to allocate 10%, or $1,000, across each of 10 trades to diversify across multiple trades without risking your entire account on one position.

Stop-loss orders and take-profit orders are also key tools for managing risk. A stop-loss order automatically closes a position when the market moves against you beyond a specified point, helping to limit potential losses.

For example, setting a stop-loss order slightly below the purchase price of ACB CFDs means your position closes if the price drops significantly, thereby capping losses. Conversely, a take-profit order closes a trade at a predetermined level, locking in gains when the market reaches your target price.

However, be aware of potential slippage, where the actual closing price may differ from the specified order price due to rapid market changes.

By combining careful leverage use, prudent position sizing, and strategic stop-loss and take-profit orders, you can effectively manage risk while trading ACB CFDs and maintain better control over your trading outcomes.

Conclusion: Understanding Aurora Cannabis Stock Trading

Aurora Cannabis CFDs can present an opportunity for traders to speculate on the dynamic cannabis industry without the need to own actual shares. By using effective risk management and understanding and staying informed on market trends and regulatory changes, traders can better position themselves to make informed decisions about trading ACB.

If trading Aurora Cannabis CFDs interests you, you can start trading ACB CFDs with Plus500.

ACB Stock Trading FAQs

How does leverage work in ACB CFD trading, and what are its risks?

Leverage in CFD trading allows traders to control a larger position with a smaller initial capital outlay. For instance, with a leverage ratio of 1:10, a $100 margin deposit can control a $1,000 position. While leverage can amplify potential profits, it also magnifies potential losses, meaning even small market movements can significantly impact a trader's account balance. This makes careful risk management crucial when using leverage.

What impact do regulatory changes have on Aurora Cannabis Inc.'s business and stock price?

Regulatory changes, such as legalising or restricting cannabis use in different regions, can significantly affect Aurora Cannabis's business environment, costs, and market potential. Positive regulatory developments, like the legalisation of recreational cannabis, can expand Aurora's market opportunities and potentially drive up its stock price. Conversely, regulatory hurdles or tightening restrictions can increase operational costs and negatively impact stock performance.

What should traders consider when using news-based trading strategies for ACB CFDs?

When using news-based strategies for trading ACB CFDs, traders should focus on staying informed about significant market news and events, such as economic data releases, cannabis industry developments, and corporate earnings reports. This strategy requires quick reactions to market-moving news, as such events can create volatility and short-term price movements. Traders should be aware of the higher risks associated with news-based trading due to the unpredictable nature of market reactions.